Watchdogs have confirmed plans to strong-arm annuity providers into helping retirees find better deals, following research showing nearly half of buyers get lumbered with worse products than they deserve.

Firms will be forced to rank annuity quotations so that people can easily identify the best ones, and to overhaul and behaviourally test information packs to make them easier to understand and encourage people to shop around.

In the longer term, 'pension dashboards' will be created so that retirees can find all their lifetime pension savings in one place, according to plans laid out by the Financial Conduct Authority.

Failings uncovered: FCA is cracking down after a review last year found the annuities market was not working well for most people

The traditional way of funding retirement, annuities give you a guaranteed income for life. But annuity values are poor due to low interest rates and increased longevity, while many people are also left out of pocket because insurance companies do not explain their options properly.

Pension freedom reforms from next month mean over-55s will be able to access their full retirement savings and have the power to invest and withdraw money as they wish - removing the need to buy an annuity and allowing people to opt for income drawdown products previously restricted to wealthy savers.

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However, plenty of people are still likely to need or want a guaranteed lifetime income in retirement, and the FCA is cracking down after a review last year found the annuities market was not working well for most consumers.

A follow-up study published last December uncovered further details of how retirees are left out of pocket, with those suffering from medical conditions that raise the likelihood that they will die sooner - such as diabetes, high-blood pressure, and smoking-related illnesses - missing out by the most.

WHAT IS PENSION FREEDOM?

'Pension freedom' reforms will give people greater power over how they spend, save or invest their retirement pots from next month.

Key changes include removing the need to buy an annuity to provide income until you die, giving access to invest-and-drawdown schemes previously restricted to wealthier savers, and the axing of a 55 per cent 'death tax' on pension pots left invested.

Also, savers won't be limited to one chance to take a single tax-free lump sum worth 25 per cent of their pension pots, with the rest taxed as income afterwards.

Instead, Chancellor George Osborne has announced that people will be able to dip in and make as many withdrawals as they want, each time getting 25 per cent tax-free and the rest taxed like income.

The changes apply to people with 'defined contribution' or 'money purchase' pension schemes, which take contributions from both employer and employee and invest them to provide a pot of money at retirement.

They don't apply to those with more generous gold-plated 'final salary' pensions which provide a guaranteed income after retirement.

Their shorter life expectancy means they could qualify for an 'enhanced' annuity that pays a higher rate of return.

Despite long-standing requirements to explain savers' options for their pension pot when they retire, the information provided by companies made it less likely that retirees would shop around, the report said.

It found that 60 per cent of those buying an annuity do not shop around to get the best deal. And of these, 80 per cent could get a better deal than they do. This means 48 per cent of the total of those buying annuities end up worse off for the rest of their lives than they should be.

The FCA was so concerned that these customers routinely fail to get an enhanced deal that it has asked the majority of firms to review a sample of sales dating back to 2008 to see if they were fair.

Once this evidence has been gathered, regulators will decide on further action and could order firms to offer redress to customers.

The FCA estimated that those buying a standard annuity missed out on income worth £67 a year by failing to shop around. For enhanced annuity customers this rose to between £110 and £175 a year.

One major annuity company, Aviva, has already begun to pay redress to 250 customers because it found they were not asked about health conditions when they should have been.

In its previous report, the FCA criticised so-called 'wake-up' packs sent out by pension providers to customers approaching retirement for being too long and complicated.

Info overhaul: FCA criticised so-called 'wake-up' packs sent out by pension providers to customers approaching retirement for being too long and complicated

Alternative packs will now be 'behaviourally trialled' to ensure they are effective in getting savers to understand and act upon the options available to them.

Firms will also have to make clear to consumers how their annuity quote compares relative to other providers on the open market. A code of conduct developed by the Association of British Insurers, which is compulsory for ABI members, will now be enshrined as FCA regulation and apply to all pension companies.

GET MORE FROM THIS IS MONEY

Meanwhile, changes brought in to support the pension freedom reforms could provide new safeguards for people buying annuities.

The Government's free Pension Wise service, which is now taking bookings on 030 0330 1001, will give people impartial help in deciding their retirement income options.

Meetings are being delivered over the phone by The Pensions Advisory Service and in person by the Citizens Advice Bureau. They are independent from the pensions industry, and therefore above suspicion that the help will be self-interested in any way.

The sessions will give general guidance but not personalised advice - for that, you will have to pay a financial adviser, who will charge upfront fees and percentage charges on savings pots in exchange for their services.

Firms now have to alert workers about the tax risks of accessing too much of their pension pots, and question them about health and lifestyle choices and marital status in 'direct and simple language' before they make decisions they can never take back, under a new set of rules rushed out by the Financial Conduct Authority without any industry consultation.

Yvonne Braun of the Association of British Insurers said: 'Pension providers are committed to providing customers with clear and meaningful information to help them make the retirement choices that are right for them.

'With the incoming pension reforms set to revolutionise people's retirement options, we share the FCA's aim of ensuring that customers have confidence they are getting the best possible retirement income for their circumstances. We look forward to working with the FCA on the practical implementation of their remedies.'

Richard Lloyd, executive director of consumer group Which?, said: 'The FCA’s plans should improve a pensions market that has let down millions in the past. But having identified concerns about the historic mis-selling of annuities, urgent action is needed now so consumers can know if and how they will be compensated.

'Which? has been campaigning for Better Pensions and it’s good to see backing for a pensions dashboard that enables consumers to see all their pensions and savings in one place. The regulator must now ensure that consumers have confidence in the retirement income market before they have to make complex choices.'